Your finances: Figuring net worth yearly highlights financial goals

I don't mean your inherent value as a human being, which of course is priceless. I mean your net worth. What are you worth from a financial perspective?

Determining a client's net worth is a foundational part of the financial planning process. It is important to understand a client's current financial picture, so we know how to create a road map to help them get where they want to be in the future.

Figuring out your own net worth can be a valuable exercise for anyone. The process is really pretty straightforward. You add up all of your assets and subtract all of your liabilities. The resulting number is your net worth.

If you have ever applied for a mortgage or a student loan, then simply by completing the forms, you have probably deciphered your net worth.

For this exercise, you can be as big-picture or as detailed as you want to be with your numbers. After all, this is for your own personal use.

Determining your net worth on an annual basis is a good habit to start. By comparing your net worth from year to year, it will help you chart your progress toward your various financial goals. This exercise will help you gauge when you are heading in the right direction, or if you need to change direction.

To get started, you can find numerous net worth calculators on the Internet. However, for this exercise, going old school might be easier. All you really need is a single sheet of paper.

First, list all of your assets and their values on the top portion of the sheet. This would include your house and other real estate, your cars, your investments, retirement accounts and bank accounts. You can also include the cash value of your life insurance, as well as antiques and collectibles you might own.

Add up the total value of all your assets.

Then, list all of your debts and outstanding balances.

This would include your mortgage, home equity loans, car loans, student loans and credit card debt. Add up your liabilities for a total value.

Finally, subtract your total liabilities from your total assets to arrive at your current net worth.

Checking your pulse is a routine part of your annual checkup at the doctor's office, because it is an indicator the doctor uses to track your health.

An annual net worth calculation can help you get a quick read on your financial health. April is "financial literacy month," so mark the occasion by determining your net worth as a check of your financial health.

Laura Medigovich is a certified financial planner and vice president for M&T Bank's Hudson Valley region. The views expressed by the author are her own and are not endorsed by M&T Bank, M&T Securities or their affiliates.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.